Emmaus Village Carlton has taken out three loans with Charity Bank. Trustee Colin Bramall joins Charity Bank’s Peter Hughes, to explain how the loans have helped Emmaus Village Carlton to prosper.

Can you share the purpose of each of the loans?

Peter: The first one was for £180,000 in 2009, to part-fund the refurbishment of Emmaus Village Carlton’s onsite bistro. The second and third (£420,000 in total) were to improve the charity’s retail space.

Colin: The work we’ve done on the retail space has allowed us to increase sales considerably.

Could you have achieved this without loan finance?

Colin: No, it’s fair to say that we’d be in a very different place now if the trustees hadn’t taken the decision to borrow back in 2009. By increasing the retail business, we’ve been able to provide more homes for homeless people. Back then we offered 27 rooms; now we have 42. Our last extension was paid for partly through fundraising and partly through our own cashflow. We currently have almost £450,000 of reserves.

The loans have made us a much more confident organisation than we otherwise would be. Without them, we’d be leading a rather more ‘grubby’, hand-to-mouth existence.

Peter: Taking that first loan was a step change for Emmaus Carlton Village. It wasn’t just about the money – it was the disciplines that went with it. The professionalism and operational efficiency of the organisation have improved. Emmaus Carlton Village has doubled its income, from half a million pounds before the loan to £1 million today. That’s self-generated income, not donations. The charity also offers much better work experience opportunities for its service users now.

Why did Emmaus Carlton Village choose Charity Bank for its loans?

Peter: Charity Bank was recommended to the trustees by Emmaus UK, so I met with them to explain how Charity Bank works and we went from there. They had the normal concerns any organisation would have when taking out a large loan. Are we liable? What happens if things go wrong? And so on. But Charity Bank wouldn’t have lent them the money if it wasn’t a viable initiative. Some of the trustees had a commercial background, so they were used to loan finance. And they were able to speak to other Emmaus groups who’d borrowed money from us, which helped to ease their concerns.

How did Emmaus Carlton Village find the process of taking out that first loan?

Peter: The first loan is always a learning curve. The legal requirements were more complex than the charity expected because it’s a leasehold site with covenants attached to it.

Why did Charity Bank offer the loan when other lenders wouldn’t have?

Peter: We could see there was a strong board of trustees with the relevant group of skills. They also had that overarching connection with Emmaus UK so had extra support if they needed it. The repayment period was comfortable; the project was relatively low risk and we could see there was a tangible social impact.

What support do you get from Peter as your Charity Bank Regional Manager, Colin?

Colin: Whenever I need him, which isn’t a great deal, Peter is always there. He’s given us ideas before that we’ve acted on. To be honest, I’ve never wanted anything other than what we get from him.

We also have a deposit account with Charity Bank. I’m not gooey-eyed about the bank, but would I want to go elsewhere? No. The way Charity Bank is funded means it has an altruistic outlook on life. We’re not having to deal with people who expect our charity to be something that it’s never going to be. The Emmaus movement in itself is very unusual and most lenders wouldn’t understand us. I expect some finance providers would try to force us to change our values to meet their requirements.

What would you say to trustees who say loan finance is too risky?

Colin: You’ve got to rely on your professional judgement and look at the individual circumstances of your organisation – the constraints you operate under, the quality of the people you have in the charity, the skills of your trustees, the assets you have, and so on. There’s no point growing for the sake of it; consider whether there’s a real need for the service you want to provide.

Peter: Look at the business case and the business model. Is a loan the right thing to do for your organisation?

What advice would you have for other trustees who are planning to take out a loan?

Colin: It depends on the individual organisation, but principally I’d say to treat it like any other business loan. The only difference is that this loan will be underpinned by revenue which is largely donation led. You need to undertake a thorough due diligence process.

Peter: I’d also suggest that trustees speak to umbrella organisations or other charities who have already taken out a loan. We can make those introductions if needs be. You should also get expert, independent advice, from an accountant or consultants for example. Speak to a critical friend to get their views.

Colin: Amongst our trustees, we have the skills to do much of that decision making in-house but a lot of organisations don’t.

Peter: Yes, it’s worth considering whether you need to strengthen your trustee group. For example, if an organisation is looking to buy a property for the first time, it’s a good idea to bring someone onboard who has experience in that area. We can help borrowers to access the Reach Fund, which offers support to charities who need to strengthen their position before they apply for social finance.

What does the future hold for Emmaus Carlton Village?

Colin: We’re expecting there to be changes in housing benefit, which will affect us. It equates to a quarter of our income. But we’ve built up a good level of reserves and are profitable now, so we’ll be able to cover the difference. We don’t exist to make profit of course; we exist to provide a route to independent living for people who are homeless. We’re probably close to capacity now, so I suspect we’ll soon be looking to take out another loan with Charity Bank, probably for a new site in another town, building on the infrastructure we have in Carlton. We feel more confident that we can do things other charities wouldn’t.

Since taking its first loan in 2009, Emmaus Carlton Village has increased its rooms from 27 to 42, and doubled its income to £1 million. The charity is now considering taking out an additional loan to expand its services to other areas.

Last reviewed: 22/04/2020